Recession Finally Hits Video-Game Industry

U.S. video game sales slumped more than expected in March and were flat in the first quarter when compared with a year earlier — hurt by the recession, a shift in the Easter calendar and fewer big game launches.

March sales of hardware, software and accessories fell 17 percent to $1.43 billion when compared with the same month a year earlier, according to market researcher NPD Group. For the entire first quarter, sales were flat at $4.25 billion.

While analysts widely expected game sales to slow, the month's double-digit decline was larger than most estimates, which forecast software sales to come in flat to down slightly.

Americans bought fewer video games and fewer systems to play them on in March, a month that also saw overall retail sales fall unexpectedly. The Commerce Department said earlier this week that retail sales slid 1.1 percent during the month, well below the 0.3 percent increase that analysts expected.

The video games industry has grown accustomed to performing better than the overall market, but the latest results show it's far from immune to the recession.

Hardware sales fell 18 percent to $455.6 million and software sales declined 17 percent to $792.8 million. Sales of accessories such as controllers and other add-ons slipped 15 percent to $185.7 million in March.

NPD analyst Anita Frazier said though it may be tempting to conclude that "the sky is starting to fall on the video games industry," the shift of the Easter holiday to April hurt this year's sales. Last March also saw the launch of Nintendo's "Super Smash Bros. Brawl," which ended up becoming one of the year's best-selling games. There was no comparable game launch this past month.

Of the gaming platforms, NPD said only Microsoft's Xbox 360 experienced higher unit sales than in March 2008. Part of this is because sales of the Nintendo Wii were pushed higher last year by the launch of "Super Smash Bros."

Even so, the Wii remained the month's best-selling console with 601,000 units sold, followed by the handheld Nintendo DS at 563,000. The Xbox 360 came in at 330,000 units and Sony Corp.'s PlayStation 3, the most expensive console, at 218,000.

"If there was one area that surprised me this month, it was hardware sales," Frazier said. "While it's not unusual for March hardware sales to be lower than February, I thought we'd see higher unit sales on most platforms."

Nintendo's Denise Kaigler, vice president of corporate affairs, said the recently launched DSi, the latest version of the popular handheld system, sold 435,000 units during its first week on sale. The bulk of this will come out in April's video game sales numbers.

Last month's most popular games spanned a wide range of genres. The best-selling title was Capcom's horror shooter "Resident Evil 5" for the Xbox 360, followed by "Pokeman Platinum" for the Nintendo DS. Microsoft's "Halo Wars" rounded out the top three.